When is Refinancing Worth it?
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It has been said that only in the case your new interest is at least 2 points under your current rate, should you refinance your loan. Perhaps that was sound advice a number of years ago, but as refinance costs have been falling recently, it could be a good time to take a serious look. A refinance is often worth its cost many times over, factoring in the benefits that it brings, along with a reduced interest rate.
Advantages of Refinancing
When you refinance, you may be able to reduce the interest rate and monthly mortgage payment amount, sometimes considerably. Additionally, you might have the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also be able to build up home equity faster by switching to a shorter term mortgage loan.
All of these benefits do come with some expense, though. With your refinance, you are paying for a lot of the same things you were charged for during your existing mortgage loan. These could include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
You might investigate paying points to receive a reduced interest rate. Your savings over the life of the loan may be substantial if you have paid up front about three percent of the new loan balance. We recommend that you consult a tax professional before acting on hear-say that any points paid may be deducted on your taxes.
Another cost that borrowers might take into account is that a reduced interest rate will reduce the interest amount you'll deduct from your federal income taxes. We can help you do the math! Call us at (207) 571-8034.
Ultimately, for most the total of initial costs to refinance are made up soon in monthly savings. We will work with you to figure out what loan program is perfect for you, considering your cash on hand, how likely you are to sell your residence in the near future, and the effect refinancing might have on your taxes. Call us at (207) 571-8034 to get started.
Want to know more about refinancing your home? Give us a call: (207) 571-8034.